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2012 (6) TMI 483 - AT - Income TaxDTAA between India and Netherlands - Re-assignmnet of dredging contract being awarded by Gujarat Adani Ltd by assessee (Netherlands company) to its Indian subsidiary - reimbursement by subsidiary of expenses incurred by appellant treated as Fees for Technical services(FTS) by Revenue on ground that subsidiary has no technical expertise or any other wherewithal to carry out the contract - Held that:- Cost allocation agreement entered into between the assessee company and its Indian subsidiary has unequivocally declared that the Indian company does not have any sort of technical expertise or resources and ability to carry out the dredging contract assigned to it. It is in the light of the above declaration that the assessee company has undertaken to provide all sorts of services, wherever necessary, to execute the dredging contract. Such services include not only arranging the dredgers from abroad, but also application of technical mind to select and choose appropriate parties to execute the work entrusted to its Indian subsidiary. Also, assessee has not established that it had offered services to the subsidiary company on cost to cost basis at best reasonable and competent prices available at that point of time. Therefore, it is established that assessee had rendered technical services to its subsidiary in India and the payments were in the nature of fee for technical services - Decided in favor of Revenue. Existence of Permanent establishment - Held that:- If we pierce the veil of assignment contract and go to the root of the case, we find that there is interlacing of activities and interlocking of funds between the assessee and its Indian subsidiary in executing the dredging contract. Hence, relationship of agency is there and the existence of permanent establishment is also there. Validity of reassessment proceedings - original return processed u/s 143(1) - Held that:- When the facts of the case are so complicated and cumbersome and when the return was only processed u/s 143(1), the materials available on record along-with the return filed by the assessee themselves constituted sufficient materials in the hands of the AO to hold a reason that income had escaped assessment. Where the return was processed u/s 143(1), there is no room even for an earlier conviction. Hence, issue of notice and passing of assessment order u/s 147 is to be upheld - Decided in favor of Revenue.
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